Co-founder of Kenko Health Claims that Regulatory Obstacles Caused the Firm to Fail

Nitin Konde, Varun Bhardwaj

Nov 6, 2024 — 3 min read

Kenko Health Co-founder Blames Regulatory Hurdles for Failure

The Insurance Regulatory and Development Authority of India (IRDAI) was criticised by Aniruddha Sen, co-founder of the health insurtech startup Kenko Health, which closed its doors in August of this year due to financial difficulties, for allegedly engaging in obstructive practices. Sen attributes the company's demise primarily to regulatory barriers to obtaining an insurance license.

Sen described a two-year struggle to get an insurance licence from IRDAI, pointing to administrative roadblocks that limited their entrepreneurial ambitions and hindered creativity.

Dhiraj and I spent two years chasing down people at the IRDAI in an attempt to obtain an insurance licence. The chairman began the process by publicly urging companies to come forward, raise money, and submit an application for a licence. Sen said in a LinkedIn post, "We did so against better judgement and hindsight of past experience, only to face an onslaught of obstacles that culminated in the destruction of our company, our employees’ livelihoods, and our collective dreams."

Officials’ Discouraging Behaviour a Major Cause of the Downfall

According to Sen, a senior finance department official publicly mocked entrepreneurs, saying things that were "discouraging" and "detrimental to India’s startup ecosystem." One of the officials said during one meeting that we "bring shame to the country," he disclosed, implying that IRDAI officials thought it was shameful for the private sector to succeed and create money.

He further said that the department's stance appeared to promote a small number of businesses—government-run firms and businesses owned by wealthy elites—while impeding aspirational entrepreneurs. Sen further asserted that the company was not given clear communication regarding the status of the application and that some regulatory requirements increased the burden. He revealed that we had to convert our Compulsorily Convertible Preference Shares (CCPS) into equity, which resulted in a number of issues, such as bonus share issuance and short-term capital gains taxes from secondary sales.

IRDAI’s Lack of Communication Added More Agony to the Pain

Despite fulfilling required conditions, Sen claims the IRDAI never notified Kenko Health that its application would be rejected. We "don't fit the profile" of promoters for an Indian financial services company, one of the officials told us categorically. He described the chairman's behaviour as "dismissive and condescending," recalling that "he dismissed us, saying that only wealthy, well-connected individuals were suited for such roles."

In light of other authorities like SEBI and RBI welcoming change, he questioned the IRDAI's dedication to promoting innovation. He claimed that the insurance industry in particular is still stagnant, rife with antiquated procedures, and managed by people who have no idea what modern consumers need and how technology works.

Sen urges government leaders like Vivek Joshi, who served as Secretary to the Government of India, Department of Financial Services, Ministry of Finance, to address regulatory transparency and startup issues, and he believes that a "special team" should overhaul IRDAI and attract investment. Sen said, "They destroyed my company, my livelihood, and the hopes of everyone involved," as he ended his post with a request for accountability.